Beyond BuzzFeed: Tackling the 25 Toughest Homeownership Questions

Can You Beat the High Mortgage Payment Odds?

In a housing market where affordability and competition are key concerns, this blog post addresses the challenges faced by potential homebuyers, particularly those struggling to make a significant impact on monthly mortgage payments despite substantial down payment savings. Through a detailed examination of the New Hampshire seacoast area, we highlight the nuances of median home prices and the importance of understanding local real estate markets.

Three Main Takeaways:

• The Harsh Reality of Down Payments and Monthly Mortgages
• Navigating High-Cost Markets
• Strategic Steps for Building a Real Estate Portfolio in a Changing Market

By illustrating the challenges and strategies of navigating the current housing market, the post encourages potential homebuyers to view homeownership not as an insurmountable obstacle but as an achievable goal through strategic planning and patience. What insights will you gain?

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Where the dream of homeownership seems increasingly out of reach for many, a recent Buzzfeed article captured 25 critical issues that today’s homebuyers are grappling with, from the soaring costs of down payments and monthly mortgages to the relentless competition and dwindling inventory in desirable areas…

This blog series aims to take a deep dive into each of these 25 Buzzfeed issues. We’ll explore every facet of the current market conditions. Each post in the series will tackle one specific concern, providing insights, expert analysis, and practical advice to help you navigate the complexities of buying a home in today’s economic environment.

Whether you are a first-time buyer, a seasoned investor, or simply curious about the state of real estate, this series will provide perspective to help you make informed decisions.

With some of these widespread concerns laid out, let’s dive directly into one of the Buzzfeeed voices:

“No matter how much I save for a down payment, it will never be enough to make any kind of dent in the monthly housing payment. It’s taken me 10 years to save $50K, and it’s a drop in the bucket compared to the housing prices in my area, where the median cost is over $500K. My partner and I have elderly parents here and jobs that don’t transfer well, so moving across the country isn’t feasible, either.” —Anonymous

In April 2014, the median home price in the New Hampshire seacoast area was $519,000. That number tells us that half of the homes on the market are priced below $519,000, and the other half of the homes on the market are priced above $519,000. I always have to remind myself of this, because I tend to get median confused with average. I mean, I know the difference, I just have to look it up like I always have to look up the difference between the verbs lay and lie—one has something to do with a chicken, and the other has to do with napping.

Savings Statistics

But Anonymous, you have not been napping because you saved $50,000 in ten years! I’m not sure how aware you are of how huge of an accomplishment that fifty grand is. That is some amazing work and sacrifice. Kudos and congratulations.

You’re ahead of most Americans. 401ks aside, the median bank account balance in the U.S., according to Northwestern Mutual’s 2023 Planning & Progress Study, sits at $8000. And Only 31 percent of Gen Zers say they have enough savings to cover an unexpected $1,000 expense, compared with 43 percent of millennials, 36 percent of Gen Xers and 59 percent of baby boomers, according to Bankrate’s latest emergency savings report.

Interviewing Real Estate Agents

Also. Anonymous, you should speak with a mortgage broker because with fifty grand in the bank, technically, you only need $15,570 down payment for that $519,000 house.

But. I get what you’re saying. You’re looking to make a dent in your monthly mortgage payment, and that is something else entirely. More specifically, you want to live close to your jobs and parents. You have built a life where you currently reside, and you shouldn’t have to give that up.

So let’s get a little bit more specific and talk about where I live in Dover. You can take the broad strokes of this post and apply the principles to your own local area real estate market, but the first step is to speak with a qualified local real estate agent. You should speak with that agent way before you are prepared to move forward with a purchase. This is probably one of hardest steps in buying a house because often the general public feels that once they speak to a real estate agent, the more salesy the agent gets, or the agent blows them off because the timeline isn’t now.

I’ve said it before too: there are over 6000 Realtors just in New Hampshire, and as of May 27 only 1361 homes on the market in the entire state. That equals a lot of desperate, hungry agents. I cannot emphasize enough that you need to thoroughly  interview several agents before decided upon who you want to work with, or even just have a conversation with.

The Dover Housing Market

In Dover, the media home price is $599,900.

The lowest priced home, a 765 square foot two-bedroom sold in January 2024 for $287,000. And one of the bedrooms the only thing that fits in that room is a bed.

If you have other family members living with you, very good chance this house wouldn’t have worked for you. Plus, the house was on the market for only eight days. The next house up from that, 1,118 square feet, $300,000, on the market four days. So on so forth with the tiny homes.

Not saying anything is wrong with a tiny home. They make perfectly decent starters. Or, if you are in the mood to downsize because your kids finally moved the heck out, perfectly decent enders.

Almost all of the homes that have sold in Dover over the past six months have sold for more than the asking price. When we get into the $450k range, we see accepted offers in the neighborhood of 50k or more.

Personal Renting Experience

Sigh. I currently rent in Dover. That is probably a weird thing for a Realtor to admit. Look, I can walk to my favorite coffee shop from where I live. Sometimes I get vegan chili for lunch from the health food store on the corner. My kid attends the school they want to attend. The landlord mowed my lawn yesterday. I don’t pay for heat, water, sewage, homeowners’ insurance, or taxes. Okay, yeah, those expenses are built into my monthly rent, but you get what I’m saying. There are completely valid reasons to rent; there is nothing wrong with renting.

Dover Affordability

I’ve had quite a few first-time home buyers tell me they weren’t going to buy unless they bought in Dover. But at $300,000 they were already at the top of their budget. They had zero room to put in an over asking price in Dover because look at that competition—eight days on the market, four days on the market. Listed and sold in mere hours.

Dover Appeal

Dover, New Hampshire, by the way, is delightful. town that offers a perfect blend of historic charm and modern conveniences. Located along the picturesque Cochecho River, with a vibrant downtown, and a range of community events, from farmers’ markets to local festivals, (The Apple Harvest is fun) ensuring there’s always something happening to bring people together. An abundance of parks, surrounding trails, the Woodman Institute, the Children’s Museum, easy access to nearby cities like Portsmouth, Manchester, Boston. Everybody wants to live here, really.

But. You can’t start in Dover because you can’t afford Dover.

The New Housing Market Reality Nobody’s Talking About

You used to be able to saunter into almost any town with a modest down payment and buy a house, and those days are gone. The U.S. housing market has fundamentally changed. And nobody is talking about this change. Instead, we simply see media outlets complain about how unaffordable the housing market is.

The housing market’s transformation has made the home-buying process more complex. In places like Dover, high demand and low inventory have driven up home prices significantly. According to a report by the National Association of Realtors, the national median home price has risen by 4.8% over the past year, reflecting a broader trend that affects towns like Dover.

To navigate this challenging market, start your homeownership journey in more affordable outlying areas. These areas offer lower entry prices, allowing buyers to build equity over time. For example, according to Zillow, the median home price in Barnstead, NH is $404,285 compared to Dover’s $502,926.

By beginning in these more affordable towns, buyers can gradually work their way into Dover. This approach makes homeownership more attainable. It’s a stepping-stone process that reflects the new reality of the housing market—a reality that requires patience, strategy, and flexibility.

Additionally, this stepping-stone process outlines a path to not only homeownership but also toward a real estate investment portfolio that generations passive income and mitigates the impact of monthly mortgage payments.

Step-by-Step Real Estate Investment Guide

1. Buy First Home with 0-3% Down: Programs such as FHA loans enable first-time buyers to purchase their initial home with minimal down payments. This step is crucial for getting a foot in the door of homeownership. After 1-2 years, you have two potential paths to consider:
   • Selling the House: If the market conditions are favorable, selling your first home can yield a significant profit due to appreciation. This equity can be reinvested into your next property, further advancing your real estate investment journey.
     
   • Renting the House: Alternatively, you can convert your first home into a rental property. This provides a steady stream of passive income and adds to your real estate portfolio. Renting out your home can cover the mortgage payments and potentially generate additional income, which can be used to support further investments.
2. 1-2 Years Later, Buy a 2-4 Unit MultiFamily with an FHA Loan: After establishing some equity and credit history with the first home, the next step is to invest in a multi-family property. An FHA loan allows buyers to purchase a property with up to four units, providing the opportunity to live in one unit and rent out the others, generating rental income. This rental income can significantly offset the cost of the mortgage, making this an advantageous move. For instance, if the mortgage payment is $2,000 per month and you are able to rent out three units for $800 each, you effectively cover the mortgage and even generate a surplus, which can be reinvested or saved.
3. 1-2 Years Later, Buy a New Primary Residence with 5-10% Down: With the additional income and equity from the multi-family property, buyers can now afford to purchase a new primary residence with a slightly higher down payment. This move is strategically planned to build equity and continue climbing the property ladder.
4. 1-2 Years Later, Buy a Vacation Home with 10% Down and Produce Income by Making it a Short-Term Rental: As equity and income continue to grow, buyers can now look into purchasing a vacation home. By making it a short-term rental, this property can generate additional income, further boosting financial stability and investment returns. This step not only secures another asset but also creates a steady stream of passive income.

Building a Robust Real Estate Portfolio

This strategy also builds a robust real estate investment portfolio, helping to mitigate the impact of monthly mortgage payments in several ways:

1. Rental Income: Renting out properties generates a steady stream of income that can cover mortgage payments and provide additional financial flexibility. For example, renting out units in a multi-family property can cover the mortgage and potentially generate surplus income, reducing the financial burden on the homeowner.
2. Equity Building: By investing in real estate and allowing properties to appreciate over time, homeowners build equity, which can be used to finance future investments or pay down existing mortgages. This reduces long-term financial strain and increases overall net worth.
3. Diversification and Income Streams: Diversifying the real estate portfolio with multi-family properties and short-term rentals creates multiple income streams. This not only ensures consistent cash flow but also provides financial stability during market fluctuations.
4. Tax Benefits: Real estate investments often come with tax benefits, such as deductions for mortgage interest, property taxes, and depreciation. These benefits can lower taxable income, effectively reducing the overall cost of homeownership.

Look, don’t think of your future home as an insurmountable obstacle but as an opportunity to move through a process that builds something lasting and significant.

And in the end, You’ll have built equity, navigated the market’s challenges, and created multiple income streams through savvy investments. The financial burdens that once seemed overwhelming will now be manageable, thanks to the rental income and appreciation of your properties. Each property in your portfolio represents not just a financial asset, but a piece of your hard-earned stability and security. With patience, strategy, and flexibility, you can turn the seemingly impossible into your reality.